Remote work that increased during the pandemic is here to stay. HR departments must now assess whether the way they deal with remote workers complies with state and federal employment and tax laws. It is time to evaluate if HR compliance for remote workers is on point and make necessary changes.
Many companies that started offering remote work for the first time in response to the pandemic are now going into the 4th year of working with some employees and contractors still working offsite. Now that remote and hybrid work are considered part of the permanent employment landscape, firms that sent employees home in response to the crisis must ensure that their company policies and procedures for remote workers are compliant in many ways that onsite workers must be.
Many of these policies fall under the domain of Human Resources or Finance/Accounting. These departments have state and federal mandates they must comply with and bodies they must report to ensure everything is in line.
HR Challenges Of Remote Work
Are Workers Properly Classified?
Businesses do not withhold taxes and are not obliged to offer health insurance and other benefits for non-employees, so many try to operate with independent contractors, freelancers, and part-timers. Whether they should do this depends on three factors.
- Behavioral Control Of The Staff Member
According to federal law, employers have more control over those classified as employees versus contractors or freelancers. The Department of Labor says businesses can dictate when, where, and how staff members work. Non-employees such as contractors or freelancers can make more decisions on their own. - Financial Control Of The Staff Member
Workers who receive more than 80% of their income from a business should be considered employees. How workers are paid, if expenses are reimbursed, and if the business supplies tools like computers are considerations in the proper classification. - Relationship Between The Worker And The Business
Additional criteria include the degree of permanence of a job and how integral the services are to a business. If there are written contracts and available benefits, the job may be part of an employer-employee relationship.
The laws seem straightforward but are ambiguous in practice. Many employers require set schedules for contractors, along with other work requirements, that make the workers more like employees. Technically, the Department of Labor or the IRS could require a business to properly classify someone as an employee.
As many contractors will attest, they may sign contracts when they accept jobs, have schedules to follow, and perform work crucial to the business, yet the government doesn’t do much when they report the business.
When the government does take notice, the penalties are tough for non-compliance. The IRS, which wants the withholding taxes taken out, claims to be serious about audits for businesses that have misclassified workers.
During the pandemic, many remote workers were already employees. Companies who met their needs for more workers by turning to freelancers or contractors often kept them on for flexibility and cost savings.
Smart businesses assess whether they have contractors and freelancers properly classified and put long-term essential workers on a W-2 status. Other work through third-party subscription services that basically “employ” contractors and handle payroll, just as temporary employment agencies have done for decades.
Is The Workplace Safe?
Recent workers’ compensation cases have paid claims to remote workers outside the office. While a business can’t control the employee’s personal space, they are liable for educating workers about maintaining a safe workspace and even offering stipends to set up their home workplace and maintain such an area.
Is the Workplace Free of Discrimination?
Working from home and communicating with supervisors and other workers on Zoom or via home or email does not ensure that a workplace is discrimination-free.
People can make racist and sexist comments in online meetings, make inappropriate comments about hair and dress, and cyberbully their colleagues.
HR must enforce violations in these areas, as well as make sure that:
- All groups should receive the same benefits and employment terms based on their job, employee classification, and location.
- The company provides employees with workplace harassment prevention training so everyone knows what lines should not be crossed.
- Supervisors actively work to prevent harassment and discrimination and then field and appropriately refer complaints to HR.
Finance And Accounting Challenge
Issues involving payroll, benefits, unemployment, and taxation concern HR, accounting, and finance. Given that each country, state, and even local areas have differing regulations governing these areas, having remote workers can increase the company’s legal obligations if they have remote workers located in different states. The business must be registered in the states where employees work from.
All departments need to know local laws on all these topics. Some states, for example, expect a remote worker to pay local taxes from day one. Others have tax reciprocity with some nearby states but not all. Tax laws and insurance requirements for digital nomads vary by country.
HR needs to keep abreast of where employees are based to ensure the company complies with any laws. Companies like Airbnb, which allow their workers to work from virtually anywhere, have a 30-person team that knows the laws and files the proper paperwork. Keeping up with all this is challenging and cost-prohibitive for most companies, especially if their workforce is spread out.
Fortunately, there are companies like Obsidian HR that can handle the filings and manage payroll with appropriate tax payments to all taxing entities. A company with workers in multiple states (and without Airbnb needs and resources) would be wise to partner with a company like this to reduce both hassle and liability.
Addressing HR Compliance For Remote Workers
As companies navigate the post-Covid world and contain to explore the possibilities of remote work, they must constantly monitor HR issues. For companies that need help updating and carrying out HR policies compliant with local, state, and federal laws, plenty of professional assistance is available.
